HOT Company Profile

The Company’s revenue and earnings are derived primarily from hotel operations, which include the operation of the Company’s owned hotels; management and other fees earned from hotels the Company manages pursuant to management contracts; and the receipt of franchise and other fees.

The Company’s hotel business emphasizes the global operation of hotels and resorts primarily in the luxury and upscale segment of the lodging industry. Starwood seeks to acquire interests in, or management or franchise rights with respect to properties in this segment.

Premier and Distinctive Properties. Starwood controls a distinguished and diversified group of hotel properties throughout the world, including the St. Regis in New York, New York; The Phoenician in Scottsdale, Arizona; the Hotel Gritti Palace in Venice, Italy; the St. Regis in Beijing, China; and the Westin Palace in Madrid, Spain. These are among the leading hotels in the industry and are at the forefront of providing the highest quality and service. Starwood’s properties are consistently recognized as the best of the best by readers of Condé Nast Traveler, who are among the world’s most sophisticated and discerning group of travelers.

Scale. As one of the largest hotel and leisure companies focusing on the luxury and upscale full-service lodging market, Starwood has the scale to support its core marketing and reservation functions. The Company also believes that its scale will contribute to lowering its cost of operations through purchasing economies areas such as insurance, energy, telecommunications, technology, employee benefits, food and beverage, furniture, fixtures and equipment and operating supplies.

Diversification of Cash Flow and Assets. Management believes that the diversity of the Company’s brands, market segments served, revenue sources and geographic locations provides a broad base from which to enhance revenue and profits and to strengthen the Company’s global brands. This diversity limits the Company’s exposure to any particular lodging or vacation ownership asset, brand or geographic region.

The Company’s primary business objective is to maximize earnings and cash flow by increasing the profitability of the Company’s existing portfolio; selectively acquiring interests in additional assets; increasing the number of the Company’s hotel management contracts and franchise agreements; acquiring and developing vacation ownership resorts and selling VOIs; and maximizing the value of its owned real estate properties, including selectively disposing of non-core hotels and “trophy” assets that may be sold at significant premiums. The Company plans to meet these objectives by leveraging its global assets, broad customer base and other resources and by taking advantage of the Company’s scale to reduce costs. The uncertainty relating to the timing and strength of recoveries in the North American and European economies, combined with current political and economic environments in South America, the Middle East and other parts of the world and their consequent impact on travel in their respective regions and the rest of the world, make financial planning and implementation of our strategy more challenging.

Growth Opportunities. Management has identified several growth opportunities with a goal of enhancing the Company’s operating performance and profitability, including:

• Continuing to expand the Company’s role as a third-party manager of hotels and resorts. This allows Starwood to expand the presence of its lodging brands and gain additional cash flow generally with modest capital commitment;

• Franchising the Sheraton, Westin, Four Points by Sheraton and Luxury Collection brands to selected third-party operators and licensing the Westin, W and St. Regis brand names to selected third parties in connection with luxury residential condominiums, thereby expanding the Company’s market presence, enhancing the exposure of its hotel brands and providing additional income through franchise and license fees;

• Expanding the Company’s internet presence and sales capabilities to increase revenue and improve customer service;

• Continuing to grow the Company’s frequent guest program, thereby increasing occupancy rates while providing the Company’s customers with benefits based upon loyalty to the Company’s hotels and vacation ownership resorts;

• Enhancing the Company’s marketing efforts by integrating the Company’s proprietary customer databases, so as to sell additional products and services to existing customers, improve occupancy rates and create additional marketing opportunities;

• Optimizing the Company’s use of its real estate assets to improve ancillary revenue, such as condominium sales and restaurant, beverage and parking revenue from the Company’s hotels and resorts;

• Continuing to build the “W” hotel brand to appeal to upscale business travelers and other customers seeking full-service hotels in major markets by, among other things, placing Bliss Spa®, which the Company acquired in January 2004, in “W” hotels and expanding the W brand to resorts in non-urban areas;

• Innovations such as the Heavenly Bed® and Heavenly Bath®, the Sheraton Sweet SleeperSM Bed and the Sheraton Service PromiseSM;

• Renovating, upgrading and expanding the Company’s branded hotels to further its strategy of strengthening brand identity;

• Developing additional vacation ownership resorts and leveraging our hotel real estate assets where possible through VOI construction and residential or condominium sales;

• Leveraging the Bliss product line and distribution channels; and

• Increasing operating efficiencies through increased use of technology.

Starwood intends to explore opportunities to expand and diversify the Company’s hotel portfolio through minority investments and selective acquisitions of properties domestically and internationally that meet some or all of the following criteria:

• Luxury and upscale hotels and resorts in major metropolitan areas and business centers;

• Major tourist hotels, destination resorts or conference centers that have favorable demographic trends and are located in markets with significant barriers to entry or with major room demand generators such as office or retail complexes, airports, tourist attractions or universities;

• Undervalued hotels whose performance can be increased by re-branding to one of the Company’s hotel brands, the introduction of better and more efficient management techniques and practices and/or the injection of capital for renovating, expanding or repositioning the property;

• Hotels or brands which would enable the Company to provide a wider range of amenities and services to customers; and

• Portfolios of hotels or hotel companies that exhibit some or all of the criteria listed above, where the purchase of several hotels in one transaction enables Starwood to obtain favorable pricing or obtain attractive assets that would otherwise not be available or realize cost reductions on operating the hotels by incorporating them into the Starwood system.

Starwood may also selectively choose to develop and construct desirable hotels and resorts to help the Company meet its strategic goals, such as the ongoing development of the St. Regis Museum Tower Hotel in San Francisco, California which is expected to have approximately 269 rooms and 102 condominiums.

Competition

The hotel industry is highly competitive. Competition is generally based on quality and consistency of room, restaurant and meeting facilities and services, attractiveness of locations, availability of a global distribution system, price, the ability to earn and redeem loyalty program points and other factors. Management believes that Starwood competes favorably in these areas. Starwood’s properties compete with other hotels and resorts, including facilities owned by local interests and facilities owned by national and international chains, in their geographic markets. The principal competitors of Starwood include other hotel operating companies, ownership companies (including hotel REITs) and national and international hotel brands.

Starwood encounters strong competition as a hotel, resort and vacation ownership operator and developer. While some of the Company’s competitors are private management firms, several are large national and international chains that own and operate their own hotels, as well as manage hotels for third-party owners and develop and sell VOIs, under a variety of brands that compete directly with the Company’s brands. In addition, hotel management contracts are typically long-term arrangements, but most allow the hotel owner to replace the management firm if certain financial or performance criteria are not met.